“Rule of Law” is both a play on my name, and a statement of my values. The rule of law is a foundation for both our liberties and for order. The rule of law respects us as equals. It allows us to organize our lives, plan our futures, and resolve disputes in a rational way. There are those around the world and throughout history who have fought in great struggles for the rule of law. My role is more modest. I am a lawyer at the law firm of Sabey Rule LLP who works with people, assisting them with estate planning, probate and estate administration. I also assist people in resolving disputes about wills and estates. In this blog, I write about some of the legal topics that I deal with in my law practice, and about other legal issues that interest me. In doing so, I hope that I help others learn more about law, and that I encourage discussion about law and law reform. I hope that, in some small way, I help nurture the rule of law. You may contact me at my office at #201 - 401 Glenmore Rd., Kelowna, B.C., Canada; V1V 1Z6; telephone number: (250) 762-6111; email: s.rule@sabeyrule.ca.

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Sunday, January 09, 2011

Wilson v. Lougheed

In a recent decision, Wilson v. Lougheed, 2010 BCSC 1868, Madam Justice Ballance varied the will of Norma Yvonne Lougheed to provide Mrs. Lougheed’s daughter, Kelly Wilson, $5.5 million, out of an estate of about $19.5 million. The main beneficiary of Mrs. Lougheed’s will was her husband William Lougheed.

This case was decided pursuant to the Wills Variation Act in British Columbia, which provides that on application by a child or spouse of a deceased person, the Supreme Court of British Columbia may vary the will if it finds that adequate provision has not been made for the child or spouse. The court may then award such provision as the court considers “adequate, just and equitable in the circumstances.”

Norma Lougheed and William Lougheed were married for 35 years, when Norma Lougheed died on May 24, 2007. Kelly Wilson was her only child from a previous marriage. William Lougheed, who also had four children from a previous marriage, adopted Ms. Wilson.

William Lougheed was a very successful real estate developer. As a result Mr. and Mrs. Lougheed lived a privileged lifestyle. They were generous with their daughter and her family, assisting her in acquiring real estate, through gifts and loans, and paid for private schools for her two children. Mr. Lougheed also provided her with substantial investments through a holding company, which was worth approximately $860,000 at Norma Lougheed’s death.

In her will made in March, 1989, Norma Lougheed left her daughter cars, boats, bank accounts and four parcels of real estate, with the rest of her estate going to William Lougheed if he survived her. But before her death, Mrs. Lougheed sold all of the real estate she had left to her daughter in the will. The result was that under the will, Kelly Wilson’s most significant gift was Jewelry worth approximately $273,000, and her share of the estate would be less than 2%.

Not all of Norma Lougheed’s assets passed through her estate. Her half-interest in jointly owned assets with Mr. Lougheed that passed to him by right-of-survivorship was worth over $6,000,000. Kelly Wilson was entitled to her mother’s Registered Income Funds, which were worth about $420,000.

The court found that Kelly Wilson had a close relationship with her mother, and until her mother’s death, with her father, William Lougheed. After Norma Lougheed’s death, William Lougheed became angry Kelly Wilson, and they became estranged.

At the time of her mother’s death, Kelly Wilson and her husband Blair Wilson were having financial difficulties as a result of a failed restaurant business. They had significant debts, and had been depleting their savings. Madam Justice Ballance found that the total net value of Kelly Wilson’s assets was just over $1.2 million.

William Lougheed’s net worth, excluding his share of his wife’s estate, but including the joint assets, was approximately $32 million.

In reaching her decision, Madam Justice Ballance considered the following factors as relevant considerations to a parent’s moral obligations to an adult child:

• relationship between the testator and claimant, including abandonment, neglect and estrangement by one or the other;

• size of the estate;

• contributions by the claimant;

• reasonably held expectations of the claimant;

• standard of living of the testator and claimant;

• gifts and benefits made by the testator outside the will;

• testator’s reasons for disinheriting;

• financial need and other personal circumstances, including disability, of the claimant;

• misconduct or poor character of the claimant;

• competing claimants and other beneficiaries:

In contrast to other recent court decisions, Madam Justice Ballance rejected the view that the court may consider what the claimant would receive under the intestate succession laws if the deceased had died without a will. (See my previous posts here on this issue).

The award in this case reflected the large size of the estate, and Kelly Wilson’s legitimate expectations based on her mother’s history of treating her generously. Madam Justice Ballance wrote:

[357] Moral obligations are independent of a claimant’s financial need. The standard of living a claimant ought to have had or which he or she has become accustomed as facilitated by the testator, may influence the degree of a testator’s moral obligation: Re Berger, [1978] 2 E.T.R. 275 (B.C.S.C.); Mordo v. Nitting, 2006 BCSC 1761 [Mordo]; Walker v. McDermid, [1931] S.C.R. 94; Marsh v. Marsh (Estate), 19 E.T.R. (2d) 184, [1997] B.C.J. No. 1286 [Marsh]. The standard of living and relative financial situation of each person to whom the testator owed a moral obligation are relevant when considering their competing moral claims: Mordo. The standard of living peculiar to the testator may also play a role in determining what constitutes adequate provision: Sawchuk v. MacKenzie Estate, 2000 BCCA 10 [Sawchuk].

[358] It is frequently the case that a claimant’s expectation will be linked to his or her standard of living and the standard of living of the testator, as well as to an appreciation of the nature of any competing interests at play. A testator who has given an assured or implied expectation to an adult child arising from the magnitude of the estate and/or from the testator’s treatment of the child may bring forth or heighten a moral duty: Clucas; Marsh; Saugestad v. Saugestad, 2008 BCCA 38; DeLeeuw v. DeLeeuw, 2003 BCSC 1472.

[359] Throughout their 35-year marriage, William showered Norma with expensive jewellery and other gifts. They drove luxury brand vehicles such as Porsche, Mercedes and Rolls Royce, and owned valuable yachts which they had towed to regattas on the eastern seaboard and raced using hired crews. The palatial custom homes that the Lougheeds constructed over the years were of the finest quality and decorated with the assistance of Norma’s professional designer. Over the years, they owned various vacation properties, including in Hawaii, Palm Desert and on Bowen Island which was purchased, in part, with the proceeds from the sale of Norma’s pre-marriage home. Although Norma was occasionally thrifty over small things, by and large she and William lived in lavish style.

[360] From the time that she married William, Norma looked out for her daughter’s financial prosperity. Although it did not match the pampering that the Lougheeds permitted for themselves, Norma ensured that Kelly enjoyed a financially carefree and privileged lifestyle as a young girl and into her adulthood. Providing for Kelly was considered by the Lougheeds as a natural thing to do given their affluence and love for her.

[361] On account of her parents’ economic means and largesse, Kelly was given vehicles, the use of apartments, her own horse and was able to attend private school, a European finishing school, and other post-secondary institutions, without cost to herself.

[362] Upon Kelly’s marriage, Norma’s benevolence expanded to include Blair and the Wilson children. She periodically helped defray the cost of Kelly’s horseback riding, paid for a membership at the North Shore Winter Club, and covered the initial membership fee of approximately $19,440 for the Wilsons to join an exclusive family recreational club. Kelly was also treated to an occasional shopping spree. The Lougheeds paid for Kelly and Blair to accompany them on holidays abroad, and arranged for the Wilson family to vacation at the Lougheeds’ recreational properties.

[363] Although the gifts and other lifestyle comforts were often paid for using the Lougheeds’ commingled funds or funds out of a Norbill account, I find that as between Norma and William, it was typically her idea to confer such benefits and that she usually funded them. William was not always made privy to the details and did not care to be. He was content to allow Norma to do as she pleased.

[364] Kelly was grateful for her parents’ generosity. She was not a grasping or spoiled daughter, and did not have an inflated sense of entitlement. It was not Kelly’s habit to ask her parents directly for sums of money or other material benefits.
….

[368] Through their actions, Norma and William instilled in Kelly their views about the value of money. Norma encouraged Kelly to look to her for financial assistance and security, and to take comfort in knowing that she would ensure that Kelly would not have to want financially. At no time did Norma tell Kelly or even hint that the financial security would effectively dry up on Norma’s death. Kelly’s upbringing by her generous parents and especially her beneficent mother, coupled with the abundance of Norma’s estate and the independent wealth of her father who did not intend to provide for Kelly in his will, could not help but implicitly raise a legitimate expectation on Kelly’s part that her mother would continue to ensure her worry-free financial well-being in death as it had been in life. These factors also support the companion expectation that Kelly would receive a greater share of her mother’s estate than was left to her under the 1989 Will.

[369] In keeping with her discomfort in speaking about death or dying, Norma did not discuss the contents of her 1989 Will with Kelly. In my view, Kelly had every reason to believe that her mother would provide for her on her death in a manner consistent with her pattern of ensuring a lifestyle of financial security and privilege while she was alive. In this case, Kelly’s bona fide expectations significantly strengthen the moral duty that Norma owed to her.

Madam Justice Ballance further found that there was nothing in Kelly Wilson’s conduct towards her mother to disentitle her to a larger share of the estate, and made the $5.5 million award.

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